TheCrimsonMonkey
Summary
- Rates are surging ahead of the jobs report and hot CPI data, with 10-year and 30-year rates.
- Rising term premiums indicate investors demand higher interest for 10-year Treasuries, potentially breaking out of a multi-year base.
- Inflation swaps are climbing, suggesting rising inflation expectations, possibly due to the Fed’s aggressive rate cuts since mid-September.
- The market fears a Fed policy error, with higher long-term rates likely until inflation is controlled, potentially leading to a rate hike cycle.
- Michael Kramer, aka Mott Capital, leads Reading The Markets, with a focus on macro investing themes. He uses technical analysis and options activity to identify market entry and exit points. Learn More
Rates are breaking out ahead of the jobs report on Friday and what is expected to be another hot CPI report a few days later. 10-year (US10Y) and 30-year (US30Y) rates have soared since the Fed started cutting rates in mid-September, and have moved even higher since the December Summary of Economic Projections.
The recent rise in rates, term premiums, and inflation swaps suggests that the market is increasingly worried about a Fed policy error and, worse, the potential re-acceleration of inflation.
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